Cypress Semiconductor Corporation made an astonishing statement last month, which has had procurement professionals and commentators debating and scratching their heads about it ever since. Here’s a sample of their press release:
“The Company will not participate in any reverse auctions, including sealed-bid or iterative-bid varieties. Furthermore, the policy precludes participation in procurement programs or tactics that eliminate straightforward negotiations. The reverse-auction process has numerous drawbacks. It does not allow bidders to realise the full value of their solutions, instead focusing solely on the lowest price as a differentiator”.
There are some that will agree with Cypress and undoubtedly such a global statement causes concerns that if other suppliers follow suit this will throw a shadow of doubt across the eauction process.
Cypress has however come under fire at their alleged “short-sightedness”” and that they may live to regret issuing such a hard-hitting statement. After all price is not the only element to reverse auctions, and the lowest bid doesn’t of course always win. It comes down to having clear business specifications including a variety of elements such as quality, delivery and terms which can be established in the RFI/RFP stages; and then weighing this up against best value.
Eauctions form part of an overall sourcing strategy, and when planned and implemented correctly, provide opportunities and prove effective on both sides of the fence. Let’s just see whether anyone else echoes Cypress’s opinion before any real industry concerns can be founded, or if indeed they contradict their own statement in the future!
